Oil sands CEOs’ open letter to Canadians is a rebuke of CAPP, Kenney energy narrative

“As we head into the upcoming election, we are asking you to join us in urging Canada’s leaders of all political stripes to help our country thrive by supporting an innovative energy industry.” – open letter

An open letter from oil sands CEOs to Canadians, published Thursday in newspapers across the country, finally exposes the political fault lines in the Calgary-based oil and gas sector. The CEOs are now aggressively selling their decarbonizing strategy in a bid for greater public support, a strategy the Canadian Association of Petroleum Producers (CAPP) and the Jason Kenney government have rejected.

“We’ve reduced the emissions intensity in the oil sands by about 30% over the past two decades, and a number of oil sands operations are producing oil with a smaller greenhouse gas impact than the global average,” said the letter, signed by Tim McKay, president of CNRL; Alex Pourbaix, CEO of Cenovus Energy; and Derek Evans, CEO of MEG Energy. “We’re working to get those numbers even lower.”

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The decarbonization argument is described in detail in my book, The New Alberta Advantage: Technology, policy, and the future of the oil sands. The CEOs’ strategy is to avoid paying carbon taxes and being affected by other restrictive climate policies in Asian markets, primarily India and China, that the producers hope to open over the next five to 10 years.

It’s the “best barrel” approach. If the companies can use innovative technology to produce a cleaner barrel of heavy crude oil, then as demand eventually shrinks over time as the global energy system switches to clean electricity, then the oil sands producers’ “best barrel” will still be in demand for asphalt, petrochemicals, and perhaps even aviation fuel long after competitors like Venezuela and Mexico have been squeezed from the market.

“I think most would argue demand is increasing for a while and in that change, we want to be the barrel of oil that remains good for the planet,” Arlene Strom, Suncor’s VP of sustainability and communications, told me during an interview for the book. “We want to harness technology and innovation to be part of a transformation to a low-carbon future.”

Strom’s message, which is reflected in the letter even though Suncor wasn’t a signatory, is not CAPP’s narrative.

CAPP CEO Tim McMillan, a small oilfield services business owner and energy minister in Brad Wall’s conservative Saskatchewan Party government, has gone all-in with Kenney’s United Conservative Party. There are numerous examples to prove the point, including a gushing press release after the UCP’s landslide victory on April 16, McMillan said that “CAPP is encouraged by premier-elect Jason Kenney’s commitment to the oil and natural gas industry and looks forward to working constructively with the UCP to ensure the province meets its energy goals.”

CAPP supported also Kenney’s ridiculous $30 million “energy war room” and the $2.5 million public inquiry into “foreign-funded activism,” despite Energi Media thoroughly debunking the conspiracy narrative of Vancouver blogger Vivian Krause that served as the rationale for those initiatives.

Under McMillan’s leadership, CAPP has morphed from a policy advocacy trade group to a partisan political organization, a de facto arm of the UCP provincially and Andrew Scheer’s CPC federally.

Tim McKay, CEO, CNRL.

The final straw, however, likely came with this statement from CAPP chair Jeff Tonken during a June 14 press conference: “What we believe is the federal [Liberal] government is positioning itself to let the energy industry die so that they can get votes to get re-elected. ”The comment from the CEO of Birchcliff Energy is a public expression of what has been common knowledge in Calgary for quite some time: the old oil patch – junior and midcap producers, services sector, investment bankers and financial analysts, and so on – is waging political war against the Justin Trudeau Liberals.

The new oil patch, represented primarily by the oil sands companies, is following the path of super-majors like Shell, who acknowledge the energy transition and support robust climate policies like carbon taxes.

McMillan and Tonken must have been dismayed when Evans told CBC, “I’m fine with having Justin Trudeau as prime minister if he embraces a philosophy with respect to energy that says that Canada has a much larger role to play on the global stage and we need to encourage that part of our sector.”

But the real shot at McMillan and CAPP came from Pourbaix, who told Shawn McCarthy of The Globe, “it really was a focus [of the open letter] that we think we have not done a good enough job of communicating to Canadians all elements of our business.”

Communicating with Canadians is perhaps the biggest part of McMillan’s job. The criticism from one of the companies that provide the lion’s share of CAPP’s revenue is a real body blow to his leadership.

Alex Pourbaix, CEO, Cenovus Energy.

Readers should keep in mind that the oil sands companies are huge publicly owned corporations that rarely engage in political debates, preferring to work quietly behind the scenes and letting CAPP be the public face of the industry.

The open letter is a tacit admission by the oil sands sector, which produces 80 per cent of Alberta’s crude oil, that it has lost confidence in McMillan and CAPP.

The letter is also a sign that the CEOs will not be cowed by Kenney, who has said publicly many times that he is not happy with their support for Rachel Notley’s Climate Leadership Plan and their pursuit of “social license” for pipeline projects.

By publishing the letter across Canada, and visibly breaking with the CAPP narrative, the oil sands CEOs are throwing their considerable weight behind a different narrative, one more in tune with the direction of the federal government and, as public opinion polling has demonstrated in many surveys, with Canadian voters.

In my book, I called the oil sands companies visionaries because they understand the opportunity presented by the low-carbon future and are innovating to take advantage while at the same time supporting progressive climate objectives.

Finally, they have begun to explain that vision to Canadians, who should wholeheartedly support it.

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